China October home prices rise for first time in 14 months, outlook cloudy

Wed Nov 18, 2015 6:42am EST
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By Xiaoyi Shao and Sue-Lin Wong

BEIJING (Reuters) - Home prices in China rose for first time in over a year in October on an annual basis, signalling a housing market stabilisation that could help re-energise the listless economy.

A swift rebound in property prices, however, is unlikely due to high inventories in all but the biggest cities, forcing developers to slow the pace of or even stop expansion to protect their cash flows.

"For next year, most market players are somewhat pessimistic as new construction is still dropping and policy effects are fading away," said Liu Yuan, head of research at property consultant Centaline in Shanghai.

Average new home prices rose 0.1 percent in October from a year earlier, Reuters calculated from National Statistics Bureau(NBS) data out on Wednesday, reversing September's 0.9 percent drop, marking the first year-on-year gains since August 2014.

Even a modest recovery in a sector that accounts for 15 percent of gross domestic product is a welcome boost for an economy heading for its weakest growth in 25 years.

The numbers bootsted Chinese real estate stocks with the Shanghai stock exchange property subindex surging more than 4 percent. Greenland Holdings (600606.SS: Quote) and Poly Real Estate (600606.SS: Quote) gained nearly 10 percent.

The NBS data showed larger cities have led the price upturn, with Shenzhen the top performer. Prices in Shenzhen rose 39.9 percent in October from a year earlier, quickening from September's annual 37.6 percent.

"Looking ahead, property prices will continue to warm up in first and second-tier cities. Smaller cities will face headwinds due to inventory destocking," economists at ANZ said.   Continued...

A man walks past a wall at a construction site for a new residential compound at the Binhai new district in Tianjin, China, October 18, 2015.  REUTERS/Kim Kyung-Hoon